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Baht’s Appreciation Affects the Export Oriented Thailand

March 6, 2017
Daisy Joseph
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In export-oriented economies, currency devaluation is of great benefit. That is why Donald Trump is blaming it for being weakened purposely. Among the Asian currencies, Thailand’s Baht is rallying high and this is not being appreciated by the central bank. The bond investors are interested in purchasing Baht and the country has received $2.1 million of foreign investment this year. It is expected that Baht will fare much better than the other Asian currencies, when the US increases its interest rates.

The policy makers are hoping to revive the economic policies to accelerate growth, which was slow in the last six months. Due to the uncertainties in the major economies, Thailand is considered as a safe haven for the investors and it is not helping Thailand’s economy which depends majorly on exports.

While the other Asian currencies continue to weaken, the strengthening of Baht will not be useful for the country. The central bank is expected to intervene in the market to stabilize the currency to promote export growth. Currently, Thailand has current account surplus of 10% GDP along with increased foreign exchange reserves.

Foreign investors currently own 8.4% of the bonds in Thailand. This has increased the demand for Thailand notes by 2.2% and it helps the Baht to rise against the dollar. While the central bank can only sustain the currency to reduce the volatility, it doesn’t have the power to change the market trend. The increasing foreign exchange reserves can help the policymakers to create new plans for economic growth.